Solar-Panel Maker to Close a Factory and Delay Expansion

Solyndra, a Silicon Valley solar-panel maker that won half a billion dollars in federal aid to build a state-of-the-art robotic factory, plans to announce on Wednesday that it will shut down an older plant and lay off workers.

Source: Solyndra

Solyndra's headquarters in Fremont, Calif.

The cost-cutting move, which will reduce the company’s previously announced production capacity, is a sign of the notable shift in the prospects for cutting-edge American solar companies, which now face intense price competition from Chinese manufacturers that use more established photovoltaic technologies.

Just seven weeks ago, Solyndra opened Fab 2, a $733 million factory in Fremont, Calif., to make its high-tech solar panels. The new plant was supposed to be the first phase of a rapid expansion of the company.

Instead, Solyndra has decided to shutter the old plant and postpone plans to expand Fab 2, which was built with a $535 million federal loan guarantee.

“Fab 2 is much more efficient and cost-effective than our existing facility,” Brian Harrison, Solyndra’s chief executive, said in an interview. “We’re adjusting our plans to be more in line with where the market is and where our business is at the moment.”

When Solyndra filed for an initial public stock offering in December, it estimated it would have a total production capacity of 610 megawatts by 2013 if its two plants were fully built out. The company now expects it have capacity of 285 to 300 megawatts by 2013.

The company is the most prominent of a wave of Silicon Valley solar start-ups that hoped to transform the economics of the industry. Gov. Arnold Schwarzenegger of California and Energy Secretary Steven Chu helped break ground on Fab 2 last year, and President Obama made an appearance at the unfinished factory in May to extol Solyndra’s innovative technology.

Mr. Harrison noted that the market had undergone a significant shift since Solyndra filed for the stock offering, with solar module prices plummeting as low-cost Chinese manufacturers like Suntech and Yingli ramped up production.

That has put pressure on companies like Solyndra, which makes advanced thin-film solar modules that are less efficient than conventional photovoltaic modules but had been cheaper to install until prices began to fall sharply last year.

Solyndra said it would lay off around 40 employees and not renew contracts for about 150 temporary workers as a result of the consolidation. The closing of the old factory, called Fab 1, will save the company more than $60 million in capital expenditures, executives said.

Mr. Harrison, who became Solyndra’s chief executive in July, said that despite the cutbacks, the company’s production of solar panels for commercial rooftops would double in 2011 from the previous year. He said Solyndra continued to receive large orders from customers.

Depending on how the market evolves, Solyndra could reopen Fab 1 or expand its new factory, Mr. Harrison said.